“I hate to play the skeptic, but this whole train of thought is reminding me of the runup to Y2K. I’m embarassed to say that I took the doomsday scenarios more seriously that I should have, and as a result I’ve grown far less ready to accept predictions of impending economic/social doom. At heart, I’m an optimist — because markets are remarkably resilient things, when allowed to function freely. High energy (or food) prices are painful things — but higher prices tend to spur entreprenurship (to reap the benefits of that premium pricing) like nothing else can.”
Chris, it reminds of Y2K as well. Although Y2K itself proved to be a non-event, I think the anxiety behind it – and behind the current economic quagmire – has legitimate roots and should not be summarily dismissed. Markets are indeed resilient, and I agree with your remarks about scarcity and entrepreneurship, but markets are never enough, and some markets can be harmful when they are “free”. Banking seems to be one of them. I think you will agree that the resiliency of markets is entirely dependent upon sound underpinnings – most importantly a culture of trust and financial integrity. When the underpinnings are weak, as they were in 1929 and most assuredly are in our times, markets can fail along with everything else. Here are my thoughts on why many ordinary people see disaster ahead:
1. Deep down, Americans know this country has been enjoying a false prosperity for five or more decades, a prosperity that cannot continue indefinitely. Most Americans have been living beyond their means and they know that the economic “scales” need a radical re-adjusting.
2. Of those who are wealthy and saving money, there are three types: a) those who have “earned” their wealth unjustly; b) those who have worked honestly and diligently but whose wealth seems disproportionate to the quality of their labors; c) those who have received their wealth through favors, connections, or inheritance. The men in the first category are large in number and they have reason to be afraid: justice will find them, and perhaps soon. The men in the second category have reason to be anxious because we live in historically aberrant times. Market rewards have little relation – and sometimes they have even an inverse relation – to whether a certain kind of activity is intrinsically good or worth doing for its own sake. This eats away at the conscience, and one feels that, one day, the scales will surely be balanced. The men in the third category are anxious because they live in a country which believes, as a matter of sacred ideology, if you didn’t earn it, it isn’t yours and you are more a thief than an heir. In a normal society the response would be gratitude and its corresponding works rather than anxiety. Unfortunately this anxiety results in behaviors that may help fulfill the doomsday prophecies.
3. The modern global economy is too big and too complex for anyone to understand. Therefore it has taken on god-like qualities and is seen as an omnipotent beast whose demands must be met, a ruthless master that rewards and punishes according to its own arbitrary laws – laws which are impossible to know with certainty. With a master like this, we are bound to make a mis-step sooner or later, and we wait for the other shoe to drop.
4. Men and their empires, nations, and economies all come to an end. There is no reason to believe the United States will be the exception to the rule.